July - 2010 issue > Business

By Vishwanathan K A

Emerging businesses are faced with tough challenges in terms of people management, process improvement, and quick technology adoption. They are looking for continuously redefining their competitive advantage, strengthening the delivery of their value proposition in the market place and improving the overall organizational positioning vis-a-vis its peers. The role of HR in such organizations is becoming more strategic than operational. With aggressive business growth, HR heads need to build in scalability of HCM (Human Capital Management) processes in their long-term strategic plans.

Payroll processing, which is primarily managed by HR department in most of the organizations, offers a great scope for process improvement and cost reduction. Realizing this potential, some of the emerging businesses in the telecom, IT, ITES, and even manufacturing sectors have outsourced this to experts so that they are able to focus on issues more strategic in nature. This trend is catching up and the inherent complexity of payroll processing is making this ‘next-gen HR move’ a reality, quite sooner than anticipated. Current Issues Faced by Organizations in Payroll Processing

* Payroll is mostly ‘policy’ driven and partly ‘statutes’ driven: The business rules of an organization determine the apportionment of the various components of the payslip. These business rules are susceptible to changes due to various factors - competition changing the rules, aggressive growth trajectory of the organization, or it can also be based on demands of the various stakeholders. These rules are very specific to the organization; a simple example could be the incentive calculation for a manufacturing industry and a FBP (flexible benefit plan) for aservices industry.

Payroll processing is also affected by periodic statutory changes but they are far less complex in nature as compared to the policy driven issues. But statutes driven changes impact the competition also in equal measure and hence the overall effect is minimal.

Organizations having multiple locations have to make investment in resources to take care of the actual filing of compliance related procedures. This resource is expected to manage the relations with the local statutory office personnel and also be able to understand the periodic changes in regulations.

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